ECONOMIC SYSTEMS - Loudoun County Public Schools
ECONOMIC SYSTEMS NOTES
Countries answer the 3 Basic Economic Questions differently. What are these 3 Basic Economic Questions?
1. What to produce?
2. How to produce?
3. For whom to produce?
The type of Economic System that a country employs depends on who answers these questions and makes the decisions.
| |Free Market Economy |Command Economy |
|Primary Decision Maker |Individuals and Businesses |Government |
|(Who decides what is produced and consumed?) | | |
|Primary Economic Motive |Profit – The earnings made after all expenses have been |Providing for the needs of ALL citizens |
|(What do people want out of the economy?) |paid. | |
|Who owns the property and resources? |Private ownership – Individuals and Businesses |Public ownership – Centrally owned (owned by the |
| | |government) |
|How are the prices of goods and services |Supply and Demand |Government |
|determined? | | |
|What is the amount of choice in the economy? |Consumers have many different choices due to competition |Consumers have a lack of choice |
|What is the consumer’s role? |The consumer is king – “consumer sovereignty” |None |
| |Consumer preference determines what is produced | |
|What is the government’s role? |Minimal government involvement |The economy is centrally planned |
| | |(100% regulated/controlled by the government) |
Another economic system exists based more on history and tradition than on answering the basic economic questions:
| |Traditional Economy |
|Primary Decision Maker |Decisions are based on customs and historical precedent (traditions) |
|Primary Economic Motive |People often perform the same type of work as their parents and grandparents, regardless of ability or potential. (You are a|
| |farmer because your father trained you to be a farmer.) |
What do they look like?
|Free Market Economy |Command Economy |Traditional Economy |
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PG. 134
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